GUIDE TO MAKING AN INSURANCE CLAIM

A flood at your business premises

From a flash flood, burst river or burst water main

If you've experienced a flood at your business premises, you face a long process before you
can get your business and your life back to normal. Here is a guide to what you can expect
to happen, in what order, and the options you face.

Steps To Take

Your Options

Step 1. Safety is paramount. It is your responsibility to mitigate
any damage, prevent theft, and ensure your premises are safe
for people to enter. Once the water has subsided, there are two
key steps you must take:

Firstly, has the water compromised the electrical safety
of your premises? You must employ a qualified electrician
to carry out all the necessary safety checks before
anyone enters.

Secondly, has the water compromised the structure of
your premises? You need to bring in a qualified
(chartered) surveyor* to check.

As it's your legal responsibility to do this,
and if there's immediate danger, you
need to act immediately. You can therefore
go ahead and instruct electricians
and contractors to make your building
safe as necessary as long as the costs
are appropriate. If there is no immediate
danger, you can wait for the insurance
company to do it.

Step 2. Create a communications plan. This should include:

Communicating with staff, giving them the details they
need know about the incident and what they will be
required to do in the short term.

Communicating with customers: probably a holding
statement until you have firmer plans for restoring your
business.

Communicating with any other interested parties, such
as suppliers and the local community.

Step 3. Notify the landlord. If you do not own the property, you
need to notify the landlord immediately. It will be vital from this
point to co-ordinate all the steps you take with the landlord's own
insurance process.

Step 4. Decide if you want to use a loss assessor. A loss
assessor works on your behalf, handling the entire claim process
including buildings, contents and business interruption. The
sooner you decide to engage one, the more of the burden they
can take away, enabling you to focus on running your business
at this difficult time.
A loss assessor can make a considerable difference, particularly
with your business interruption claim, and this difference will
usually more than offset their professional fees. Getting acceptance
of liability with a business claim can take weeks or months;
the skill and experience of a loss assessor can shorten this
period dramatically, enabling funds to be released by the insurer
to keep your business running.
But remember: while the insurer deliberates, you are still required
to mitigate your losses (for example by trading in a
reduced capacity, sub-contracting orders) and to deal with all
health and safety matters.

Consider carefully the advantages of
using a loss assessor and the potential
pitfalls if you don't. If you are using a
loss assessor and you are not the freeholder,
it will be extremely beneficial if
your landlord appoints the same loss
assessor.

Step 5. Notify the insurance company. You must inform them
immediately. Many will have a special emergency number which
will be open 24 hours every day throughout the year.

All the steps above should be completed immediately following the flood.

Step 6. Appointment of emergency contractors. These will
now be appointed to carry out any immediate emergency works.
This may include:

Salvaging and safely storing any contents, stock, fixtures,
fittings or equipment which are not too badly damaged.

Stripping out all damaged materials, such as carpets,
curtains and stock.

Removing plaster to a height of one metre above the
waterline (or in some cases higher if the flood water is
deeper), as well as floorboards and skirting boards.

Sanitising the property: the floodwater (called ‘black'
water) will inevitably have been contaminated, potentially
creating a severe health hazard.

Installing drying equipment.

Treating timbers to safeguard against rot.

Checking for the presence of asbestos.

Ensuring electrical safety.

Remember: if there are any queries over your claim, your insurers
may not agree to pay for this work until this is settled. This
may take weeks or months. In the meantime, it is your responsibility
to ensure the safety of both your employees and the public.

You are entitled to appoint the contractors
you want provided they are suitably
qualified and their costs are reasonable.
You do not have to use your insurer's
contractors.

Step 7. Meet with the loss adjuster. The insurance company
will immediately appoint a loss adjuster: they work on behalf of
the insurer and will handle all the investigations and negotiations.
An initial fact-finding meeting will take place immediately,
probably at your business premises. The loss adjuster will assess
the damage as well as asking you pertinent and searching
questions about your loss including your company's financial
status at the time of the loss, policy conditions and disclosures,
your claims history, and the level of cover (i.e. whether you
adequately insured or under-insured).

Step 8. Loss adjuster's initial report. Following the initial
meeting, the loss adjuster will submit a detailed report to the
insurance company, enabling their underwriters to decide whether
or not to accept your claim. This report will include:

The circumstances surrounding the flood.

A recommendation on whether the claim should be
accepted - in other words, whether the insurer should
accept liability and pay your claim.

A reserve figure based on what the loss adjuster believes
the total value of the claim will be.

A view on whether the insurance cover is sufficient to
cover the loss. If it is not, you face penalties for underinsurance.

It may take several months to reach this stage in the process.

Step 9. Mitigate your loss. It is your responsibility to mitigate
your loss and to do everything you can to resume trading as
quickly as possible. You cannot wait until the insurance company
has accepted the claim and released funds before you do anything.
And ‘impecuniosity' (lack of funds to cover your costs) will
not be considered a valid excuse by your insurers - you are
expected to find the funds to support your business at this stage.
Additional losses that arise from delays in re-establishing the
business will not be covered by the policy. So, while investigations
into liability proceed, the onus is on you to do whatever is
necessary to ensure the survival and prompt re-establishment of
your business: if you don't and your business fails in the interim,
you are unlikely to receive an insurance settlement to cover your
full losses.

Step 10. Look for alternative premises or ways of working.
You must continue to do everything you can to keep trading.

You have a number of different options
to keep your business trading. These
include:

Moving your operations into
temporary premises while the
re-instatement work takes
place.

Sub-contracting existing orders
to another company to maintain
turnover and protect customer
relationships.

Moving activities into areas of
your business located elsewhere,
if applicable.

Step 11. Interim claim. You or your loss assessor will now
submit an interim claim for material damage and business interruption.
This should include:

Calculation for your loss of gross profit, which will generate
funding to enable you to deal with ongoing costs
such as staff wages.

Urgent interim funding for increased costs of working,
such as temporary premises and sub-contracting costs.

Step 12. Decision on liability and sufficiency of cover. This
should now be made and will then enable your insurance claim
to proceed.

Step 13. Meet with the loss adjuster. Now that liability has
been agreed, a meeting will take place to agree how the claim
can move forward. This should include a detailed plan outlining
how you can continue to trade and safeguard the survival of your
business.

Step 14. Appointment of qualified* (chartered) surveyor. He
or she will assess the damage to your premises and put together
a detailed scope of works and specification for the re-instatement
works to your premises. If you are the leaseholder rather
than the freeholder, your landlord will handle this aspect of the
claim, but you need to be kept abreast of developments, so you
can co-ordinate the scheduling of the building repairs to fit in with
the installation of your replacement fixtures and fittings.

We would recommend you do not use a
surveyor appointed by the insurance
company or their loss adjuster. You
need to ensure they are truly independent
and will work in your best interests**

Step 15. Preparation of the claims. These should include,
where applicable:

building re-instatement plus surveyors' fees.

machinery, plant and trade contents.

fixtures and fittings.

stock.

business interruption.

Step 16. Ongoing meetings with the loss adjuster. These will
continue at each stage of the claim. There will be regular meetings,
either on site or at the loss adjuster's offices, and they will
cover the entire claim including all the items mentioned in step
16. The loss adjuster will appoint a business interruption expert
to monitor the actions you are taking to mitigate your losses. He
or she will also scrutinise your claim as it progresses.

Step 17. Surveyor's work. You or your loss assessor will need
to meet regularly with the surveyor and the loss adjuster to agree
and monitor works to your premises.

Step 18. Agreement of some aspects of the claim. It is
possible that some parts of the claim, such as stock, fixtures and
fittings, plant and trade contents, will be agreed at this stage to
enable you to replace these items quickly. Many others, including
business interruption and the buildings claim, will continue.
You need to keep managing the business interruption claim
carefully in order to mitigate your losses. The surveyor will meet with the
contractors on site to agree the final scope of works.

Step 19. Tender process. The surveyor will now put the rebuilding
works out to tender. Tenders will then be submitted by
contractors bidding for the re-building work: these will be analysed
by the surveyor.

If the contractor you would prefer to
carry out the work has not submitted the
lowest-priced tender, your options are
as follows:

your contractor can reduce their
quote

you can fund the difference

you can agree a combination of
the two.

Step 20. Pre-contract meeting. The surveyor will meet with the
contractors on site to agree the final scope of works, programming
working practices, etc.

Step 21. Building works. These now progress until completion.

Step 22. Claim. Apart from the business interruption element,
most other heads of claim - for example, stock, fixtures, fittings,
plant and equipment - should be agreed by now and all payments
made. Depending on the severity of the damage, the
buildings claim may be nearing completion.

Step 23. Communications prior to re-opening. As the end of
your claims process draws near, you should start to think about
how you communicate to all interested parties that you will soon
be back fully operational. You may even want to plan additional
advertising or a re-launch event.

You may want to plan activity such as a
press campaign, additional advertising,
local leaflets or a re-launch event.

Step 24. Move back in. You should now be able to move back
in to your re-instated premises.

Step 25. Business interruption claim. This remains ongoing
until the end of the indemnity period or until the company is back
up to the level of trading it would have reached if the escape of
water had not happened.

We hope that your business can return to normal as soon as possible.

*Not all “surveyors” are qualified. You need to ensure that you use a firm of Chartered Surveyors, who are regulated by
the Royal Institute of Chartered Surveyors. This will guarantee their credentials and give you the re-assurance that they
are fully trained and qualified.

** Appointing independent chartered surveyors for substantial building works is critical for a policyholder. If you decide
not to use the services of a loss assessor such as Morgan Clark, we can still introduce you to an experienced chartered surveyor.